2022-07-05-IMF-Revenue_Mobilization_for_a_Resilient_and_Inclusive_Recovery_in_the_Middle_East_and_Central_Asia_65页_6mb

Revenue Mobilization for a Resilient and Inclusive Recovery in the Middle East and Central Asia

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Introduction

• Tax mobilization has been a longstanding challenge in the Middle East and Central Asia (ME&CA).
• The COVID-19 pandemic and the war in Ukraine have exacerbated the issue, making domestic revenue mobilization an urgent policy priority for resilient and inclusive growth.

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Key Findings

1. Inefficient and Unjust Tax Systems

   • Little progress achieved in increasing tax capacity and tax effort post-pandemic.
   • Low tax potential: Excluding hydrocarbon revenues, average tax-to-GDP ratio in ME&CA is 12%, lower than other regions.
   • Widely adopted tax exemptions, loopholes, and weak compliance contribute to large revenue gaps (average tax gap of ~14% of nonhydrocarbon GDP).
   • Personal and corporate income tax base narrow due to low rates, exemptions, and weak progressivity.
   • VAT systems often lack broad-based coverage due to exemptions and low compliance.

2. Compliance Challenges

   • Weak tax administrations:
     • Shortcomings in taxpayer tagging, large taxpayer segmentation, limited autonomy.
     • Inefficient tax administration: Low use of modern technologies, underdeveloped e-tax services.
   • Pervasive informality and reliance on cash hinder tax collection.
   • Limited international cooperation on tax matters.

3. Structural Issues

   • Low financial inclusion and widespread use of cash erode tax compliance.
   • Poor control of corruption undermines governance and enforcement.

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Policy Recommendations

1. Tax Policy Reforms

   • Broaden the tax base by reducing exemptions and improving tax rates.
   • Enhance progressivity and redistributive capacity of income taxes.
   • Improve VAT design and expand its base.

2. Strengthen Tax Administration

   • Modernize tax authorities: Automation, digital platforms, large taxpayer segmentation.
   • Grant autonomy to tax administrations and improve taxpayer services.
   • Enhance domestic and international cooperation to combat evasion and avoidance.

3. Structural Reforms

   • Promote financial inclusion and limit cash use to improve traceability.
   • Fight corruption, improve governance, and increase transparency to bolster tax morale.
   • Link tax reforms with broader formalization and economic diversification efforts.

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Critical Comparison Across Southeast Asia

• Across regions, countries with low tax capacity also feature widespread exemptions (e.g., tax breaks for SOEs, specific sectors) and weak administrative structures.

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Conclusion

Tax mobilization must go hand-in-hand with efficiency gains and equity-driven policies to support post-pandemic recovery. Countries in fragile and conflict-affected states face unique challenges but are gathering momentum through reforms.